- GBP/USD regained positive traction on Wednesday and reversed the overnight losses.
- Hotter-than-expected UK CPI report lifted the GBP amid a broad-based USD weakness.
- Reports that the UK PM Johnson will reshuffle his cabinet capped the upside, for now.
The GBP/USD pair maintained its bid tone through the mid-European session, albeit has retreated few pips from daily tops and was last seen trading around the 1.3820-25 region.
Having shown some resilience below the 1.3800 round figure, the GBP/USD pair attracted some buying on Wednesday and stalled the previous day's sharp pullback from the highest level since August 8. The British pound was underpinned by hotter-than-expected UK consumer inflation figures. This, along with renewed US dollar weakness, provided an additional boost to the major.
The USD struggled to capitalize on the previous day's late rebound from the post-US CPI swing lows, instead met with some fresh supply amid reduced bets for an immediate Fed tapering move. This was evident from a softer tone around the US Treasury bond yields, which, along with the underlying bullish sentiment, undermined demand for the safe-haven greenback.
The uptick allowed the GBP/USD pair to reverse the overnight losses, though lacked bullish conviction amid reports that the UK Prime Minister Boris Johnson will reshuffle his cabinet later in the day. Hence, it will be prudent to wait for some follow-through buying before traders again start positioning for a further near-term appreciating move.
Traders now look forward to the US economic docket, featuring the releases of the Empire State Manufacturing Index, Industrial Production and Capacity Utilization Rate. This, along with the US bond yields and the broader market risk sentiment, might influence the USD price dynamics and produce some short-term trading opportunities around the GBP/USD pair.
